Correlation Between BBVA Banco and Dollar Tree
Can any of the company-specific risk be diversified away by investing in both BBVA Banco and Dollar Tree at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BBVA Banco and Dollar Tree into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBVA Banco Frances and Dollar Tree, you can compare the effects of market volatilities on BBVA Banco and Dollar Tree and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BBVA Banco with a short position of Dollar Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBVA Banco and Dollar Tree.
Diversification Opportunities for BBVA Banco and Dollar Tree
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BBVA and Dollar is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Banco Frances and Dollar Tree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollar Tree and BBVA Banco is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BBVA Banco Frances are associated (or correlated) with Dollar Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollar Tree has no effect on the direction of BBVA Banco i.e., BBVA Banco and Dollar Tree go up and down completely randomly.
Pair Corralation between BBVA Banco and Dollar Tree
Assuming the 90 days horizon BBVA Banco Frances is expected to generate 2.11 times more return on investment than Dollar Tree. However, BBVA Banco is 2.11 times more volatile than Dollar Tree. It trades about 0.24 of its potential returns per unit of risk. Dollar Tree is currently generating about 0.09 per unit of risk. If you would invest 1,020 in BBVA Banco Frances on October 21, 2024 and sell it today you would earn a total of 1,100 from holding BBVA Banco Frances or generate 107.84% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
BBVA Banco Frances vs. Dollar Tree
Performance |
Timeline |
BBVA Banco Frances |
Dollar Tree |
BBVA Banco and Dollar Tree Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BBVA Banco and Dollar Tree
The main advantage of trading using opposite BBVA Banco and Dollar Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBVA Banco position performs unexpectedly, Dollar Tree can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dollar Tree will offset losses from the drop in Dollar Tree's long position.BBVA Banco vs. PLAYMATES TOYS | ||
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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